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UK Pub Stocks Slump as MPs Vote to End ‘Beer-for-Rent’ Tie

By Publications Checkout

Enterprise Inns led a tumble in UK pub stocks after parliament proposed a measure that would end restrictions on which beer tenants can serve.

Punch Taverns and Spirit Pub also fell. The amendment would allow renters to opt out of the 400-year-old “beer-tie” model, under which pub tenants pay cheaper rents and are limited to purchasing beer supplies directly from landlords - often at a higher price than elsewhere. The measure would apply only to companies with more than 500 pubs.

The vote is a defeat for the government, which commissioned a study that estimated as many as 1,400 pubs may close and 7,000 jobs might be lost if the measure passes.

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“This amendment is a disproportionate response which proposes fundamental change that is wholly contrary to the findings of the consultation,” Simon Townsend, chief executive officer of Enterprise Inns, said in a statement today.

Punch Taverns said the amendment would create “an unworkable two-tier economic market and would be contrary to existing legal contracts.”

Enterprise Inns fell as much as 17 per cent to 102 pence a share, while Punch and Spirit both dropped as much as 14 per cent.

Pub-franchisers could compensate for the loss in revenue by reducing planned investment valued at about £20,000 ($31,300) per pub each year, financed by centralized purchasing power, Douglas Jack, an analyst at Numis Securities, said in a note yesterday.

“We are not changing our forecasts at this stage, but continue to advise caution,” he said, adding that the amendments may face legal and competition challenges.

Bloomberg News, edited by Hospitality Ireland

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